Welcome to the new Crypto Kai Trading Compendium. A series of short & digestible written guides to help you learn all the foundations of trading from charting and technical analysis to risk management and trade execution.
Below is an example of topics we will cover over the coming weeks. Because this is a trading focused series, it is assumed you have some basic knowledge of crypto space already, including specifically the Ethereum network and having your own wallet to interact with the network. If you need a hand setting yourself up then come join our Discord or get in touch with me over Twitter and I’ll happily give you a helping hand!
- Charting platforms
- Technical and price analysis techniques
- Decentralised spot and derivative exchanges
- Risk management and trade execution (trade management)
- Trading indicators (e.g. RSI, moving averages, our own Fibonacci tools)
- Support & resistance levels, how to identify and use them
- Leverage, how to use it and being aware of the risks
I plan to keep these guides up to date with the best trading tools and platforms based on my own personal experience and create new content based on readers feedback. With that said, let’s dive in!
Trading Charts �
The first topic we need to cover on our trading journey is where to find rich, responsive charts that represent the assets we want to trade. It goes without saying that this is important due to, at least from a technical analysis perspective, the better the charting experience and more data you have to base your decisions around, the better your analysis and trading strategy is going to be.
To fulfil this need we are going to be using TradingView, which is essentially the one-stop charting standard at this point for retail traders and what I have used personally for the past 4 years almost daily. TradingView is a feature-rich, intuitive platform that is both sleek and clean and most importantly has the most complete price data across all major cryptocurrency exchanges and even decentralised exchanges such as Uniswap & Sushiswap. We’ll be spending a significant time on TradingView throughout these guides as it is free, best in class and offers the largest library of technical indicators (including our own bespoke, Crypto Kai indicators) on the platform, though that’s a topic for another day. You can sign up for a no strings attached, free account below.
Candlestick charts are a Japanese originated visualisation technique to represent the link between asset price and the influence of supply and demand. Traders use these charts to make informed decisions based on technical analysis or price action to help build a probability-based forecast on the direction of an asset (bullish or bearish).
More specifically, a candlestick on a chart displays the high, low, open and closing prices of a traded asset. When the current candle on the chart closes at a higher price than the previous candles open, the candle body is coloured green (bullish), the reverse being that if the close price is lower than the prior open then the candle body is coloured red indicating bearishness. Over time, based on a series of historic candlesticks, traders can derive common patterns that represent bottoming, reversal or breakout structures that can feed into a wider trading strategy.
- Candlestick charts are used by technical or price-action traders to execute trades based on bullish/bearish structures and patterns created by the series of historic price candles.
- Candlesticks are useful for traders as they show four price points (open, close, high, and low) and therefore visually show areas of resistance, support and indecision over time. It’s commonly said that candlestick charts are just visual representations of the emotional side of trading.
- A significant amount of trading volume in the cryptocurrency markets is derived from algorithmic trading based strategies derived from these candlestick charts.
Technical analysis & price action candlestick patterns are very important topics that we’ll be going through in-depth within a future session. Today, just familiarizing yourself with candlestick charts, how they look and what they represent is the first step.
The final topic we will cover in today's guide is the platforms you will be executing your trades on. Whilst we will be using TradingView for the charting analysis portion of our strategy, the actual trade execution will be happening on the most reputable, decentralised platforms for crypto assets available today.
Now, for the majority of active trading, especially if using leverage, the core requirements are to have the ability to react and execute quickly based on the changing market dynamics, whether that’s through the media or your own technical/fundamental analysis we need to be able to trade our strategy without worries of high on-chain gas fees or transaction times. For years, centralised exchanges have been the go-to for derivatives trading and that’s because, in my opinion, there wasn’t a product that truly encapsulated these needs for best execution.
dYdX and its Layer 2 cross-margined Perpetuals based on StarkWare’ StarkEx scalability engine and dYdX’s Perpetual smart contracts is, from my experience, the best in class decentralised exchange currently in the space and checks all the boxes that previously on centralised counterparts could provide. We will be using it throughout our trading guides, usually without any leverage aside from when dealing with the topic specifically, so be sure to give it a bookmark as we’ll be getting very familiar with the platform in the coming weeks.
Note: although we will be operating dYdX without leverage, for the most part, we will cover the topic and the benefits/risks in future sessions. Do not use leverage without a full prior understanding of what you are dealing with.
For longer-term swing trades or macro investing on assets that we plan to hold for a while and do not need the benefits of a derivative exchange, we will use standard decentralised spot exchanges where we hold the underlying assets in our Ethereum wallet.
So, you may have heard of Uniswap, arguably the biggest household Ethereum DeFi name which brought the modern automated market maker into popularity and started a completely new paradigm of decentralised trading. Well, I’m here to tell you that the vast majority of experienced traders do not actually interact with platforms like Uniswap directly when they want to swap asset A to asset B, but they do still use them. How?
Enter DEX aggregators! DEX (Decentralised Exchange) aggregators are platforms that allow you to trade your assets just like you would on Uniswap (e.g. trading ETH to USDT) but instead of just using the underlying protocol liquidity available on say, Uniswap, a DEX aggregator will route your trade order across many different protocols such as Bancor, Sushiswap, Uniswap and Curve, splitting your trade to give you the most efficient trade possible at the time — pretty giga-brain tech quite honestly and essential when you start trading with a larger amount of capital in the space.
The DEX aggregator to bookmark and that we’ll be using going forward for spot based trading is the 1inch Network. I have personally used 1inch from launch, a heavily backed reputable aggregator that has always given me the best rates for my trades based on my experience.
To understand a little more in-depth and what 1inch is doing and why it is important, below is an article by Gemini that is a concise read on the topic.